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Big Data Cos. Must Watch for Hidden Bias, FTC Says

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By Joseph Wright

Jan. 6 — Companies
supplying big data analytics services must be aware of inherent
data biases that could implicate a host of federal consumer
protection laws, the Federal Trade Commission said in a Jan. 6
report.

“Big data's role is growing in nearly every area of
business, affecting millions of consumers in concrete ways,” FTC
Chairwoman Edith Ramirez said in a statement. “The potential
benefits to consumers are significant, but businesses must ensure
that their big data use does not lead to harmful exclusion or
discrimination.”

In its report, “Big Data: A Tool for Inclusion or
Exclusion?,” the FTC encouraged big data suppliers to consider a
range of questions when using big data, including:

• How representative is the data set?

• Does the data model account for biases?

• How accurate are the predictions based on the
data?

• Does reliance on big data raise fairness or
ethics questions?

Failure to consider these issues could trigger
liability under a wide range of consumer protection statutes, the
FTC said. Those include the Equal Credit Opportunity Act, Title VII
of the Civil Rights Act of 1964, the Americans with Disabilities
Act, the Age Discrimination in Employment Act, the Fair Housing Act
and the Genetic Information Nondiscrimination Act.

Companies that fail to disclose properly how they
use big data also risk violating Section 5 of the FTC Act, the
agency said.

Mixed Reviews

Observers told Bloomberg BNA that the FTC report
contained worrisome language suggesting an expansion of unfair
trade practices liability for big data suppliers. The FTC remarked
that big data suppliers could violate the FTC Act by selling big
data services if they have a reason to know the data will be used
for fraudulent or discriminatory purposes.

“A lot of this conversation is distorted because the
word ‘discriminatory' is inherently ambiguous,” Szoka said. “All of
these companies are in the business of selling ‘discrimination' in
the broader, benign sense.”

The FTC has been known to “bury” language within
reports that contains new interpretations of Section 5 and they may
be doing so here, Szoka said.

“I'd be pretty surprised if the standing rule today
was that you could be held to have committed an unfair trade
practice because one of your customers did something unfair with
the data,” Szoka said.

The FTC focused on making the private sector aware
that new technology doesn't render existing consumer protections
obsolete, Daniel Castro, vice president of the Information
Technology and Innovation Foundation in Washington, told Bloomberg
BNA Jan. 6.

FTC Commissioner Maureen Ohlhausen submitted a
statement accompanying the report, pointing out that market forces
may eliminate many of the consumer protection issues identified in
the report. Ohlhausen's statement was “helpful,” Castro said.

“She pointed out that while there are potential
problems caused by big data, there are also many ways that these
potential problems could be resolved by competitive markets,”
Castro said. “So there is no need for policymakers to rush into
action until there is actual evidence of consumer harm warranting
government intervention.”

Federal Attention to Big Data
Questions

The FTC held a series of information-gathering
workshops on “big data” privacy issues beginning in February 2014
((19 ECLR 267, 2/26/14)).

The White House has also been active on big data
policy issues, releasing reports in February 2015 discussing both
privacy and consumer protection-related concerns raised by big
data's ability to permit sellers to engage in “differential
pricing” strategies (20 ECLR 221, 2/11/15).

To contact the reporter on this story: Joseph Wright
in Washington at jwright@bna.com

To contact the editor responsible for this story:
Thomas O'Toole at totoole@bna.com

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